Present and Future value of annuties

JimmyGGG · #1 Oct 15, 2006, 04:18 PM

Hi, i was wondering if someone could please help me with these 3 finance questions. it would be must appreciated

1. you receive payments of 1000 dollars every 8 month for the next 9 years. the first payment will occur 8 months from today. there will be a total of 12 payments. what is the present value of this investment. the required rate of return is 10% compounded annually.

my answer was 19917 but i think its wrong

2. you are surprised to learn that your mom bought a new car today. she has to make 48 monthly payments of 800$, and the first payment is due today. if the interest rate is 7% compounded quarterly, what is the price of the car?

my answer was 38928.04 but i also think its wrong

3. your sister wants to purchase an investment that will pay her 500$ every 3 months for the next 10 yrs. the first payment will be made 3 months from today. If your sister requires a rate of return of 8% compounded monthly what should she expect to pay for the investment?

this question i have no idea.

thanks

ksanders4u · Oct 29, 2006, 10:03 AM

Quote:

Originally Posted by JimmyGGG

Hi, i was wondering if someone could please help me with these 3 finance questions. it would be must appreciated

1. you receive payments of 1000 dollars every 8 month for the next 9 years. the first payment will occur 8 months from today. there will be a total of 12 payments. what is the present value of this investment. the required rate of return is 10% compounded annually.

my answer was 19917 but i think its wrong

2. you are surprised to learn that your mom bought a new car today. she has to make 48 monthly payments of 800$, and the first payment is due today. if the interest rate is 7% compounded quarterly, what is the price of the car?

my answer was 38928.04 but i also think its wrong

3. your sister wants to purchase an investment that will pay her 500$ every 3 months for the next 10 yrs. the first payment will be made 3 months from today. If your sister requires a rate of return of 8% compounded monthly what should she expect to pay for the investment?

this question i have no idea.

thanks

Hi there.

For #1 did you try a financial calculator or any of the financial functions in Excel? You can try and enter the numbers where the calculator tells you and then you could come up with the answer. In Excel, you are solving for ordinary annuity if you are to receive it/pay it at the end of the year/period. You are solving for annuities due if you are receiving/paying at the begining of a period.

I hope this helps.



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